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Low Mortgage Rates Mean a Busier December for Borrowing

Doug Whiteman
Low Mortgage Rates Mean a Busier December for Borrowing

Demand for mortgages has cooled off somewhat, though that's to be expected during what a trade group calls "the slowest time of the year for home sales," when the holidays are approaching.

But low mortgage rates continue to keep borrowing booming compared to last year at this time. The volume of mortgage applications for refinances is still nearly two and a half times what it was during December 2018.

Homeowners keep discovering that they can save money by refinancing, even if their current mortgage was taken out just last year.

Mortgage applications slow

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Mortgage applications slowed down last week.

Mortgage applications overall were down 5% last week, the Mortgage Bankers Association reported Wednesday.

Applications for refinance loans dipped 7%, but the numbers were much stronger than a year ago. Borrowers applied for mortgages at a rate 135% higher than during the second week of December 2018.

Refinances made up the majority of mortgage applications last week: 62.2%.

The amount of mortgage purchase applications — that is, for loans to buy homes — slipped 2% last week compared to a week earlier but were up 10% higher from last year.

Use this calculator to see how a refinance could cut your monthly mortgage payment.

The impact from mortgage rates

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The holiday season is typically the slowest time for home sales.

"With [mortgage] rates showing little meaningful movement, both refinance and purchase activity took a step back," says Mike Fratantoni, chief economist for the Mortgage Bankers Association. "As we move into the slowest time of the year for home sales, purchase application volume is declining."

Even so, he says borrowing took a much bigger December dive last year, when mortgage rates were a lot higher.

Home loan rates this month are the lowest seen in any December since 2012, MoneyWise.com has found.

Rates rose a bit last week, according to the survey from mortgage giant Freddie Mac. The average for 30-year fixed-rate mortgages went up to 3.73%, from 3.68% a week earlier. On 15-year fixed-rate home loans — a popular option among homeowners who refinance — rates climbed to an average 3.19%, from 3.14%.

Mortgage rates are being pushed up by encouraging economic signs. First, there was the government's monthly jobs report that showed hiring was strong in November and that unemployment fell back to a 50-year low.

And then, "a potential trade deal between the U.S. and China caused rates to inch forward at the end of last week," notes Fratantoni.

Check out today's best mortgage rates where you live.

The outlook for mortgages

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The new year is expected to be a good one for mortgages and home sales.

The year ahead should be a good one for the housing market, not only because mortgage rates are likely to stay low but also because homebuyers should find more houses to choose from, says Fratantoni.

"The good news is that the tide could be slowly turning for potential buyers," he says. "Housing starts and permits rose strongly in November, and homebuilder confidence has surged to a level not seen since 1999."

Freddie Mac will be out with fresh mortgage rate numbers on Thursday. The company has forecast that the benchmark 30-year mortgage rate will rise only slightly in the new year, to an average 3.8% throughout 2020.

While mortgage rates have moved a little higher in recent weeks, they remain exceptionally low versus a year ago.

On average, you can get a 30-year mortgage nearly one full percentage point below the rates offered in late 2018, and Freddie Mac has said refinancers this year have been saving about $1,700 a year in interest costs.

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